Detroit Emergency Manager "Freezes" Pension Fund

Tyler Durden's picture

So far, city employees of bankrupt Detroit have stoically withstood all direct and indirect eliminations of their entitlements and retirement benefits, which was to be expected: after all as per a recent finding, they are merely an unsecured claim in an insolvent entity. However, following the latest shot across the bow from Detroit's emergency manager Kevyn Orr, which freezes pension plans for all non-uniform employees, said stoicism will likely be acutely tested.

As Detroit News reports,

Emergency Manager Kevyn Orr has frozen the city’s pension plans for all non-uniform employees, closing the General Retirement System effective Jan. 1.

 

Orr’s Dec. 30 action freezes earned pension benefits for employees in the General Retirement System and creates a new 401(k)-style defined contribution retirement plan for existing and future city workers, according to a copy of the emergency manager’s order obtained by The Detroit News.

 

As part of the order, Orr also eliminated the pension “escalator,” effectively eliminating any future cost-of-living increases for all retired city employees in the General Retirement System.

 

The emergency manager’s order also closes the pension system’s Annuity Savings Fund, an added benefit for some municipal workers.

 

...

 

City employees who were not already vested in the retirement system “shall not be entitled” to pension benefits, according to the order.

 

...

 

Tina Bassett, a spokeswoman for the General Retirement System, called Orr’s pension freeze “an outrageous and over-zealous action.”

 

“Again the EM’s office demonstrates a lack of integrity and willingness to make a good faith effort when negotiating with our pension system,” Bassett said in a statement. “Currently we are in the midst of mediations that we thought were going rather well. We can only wonder, why take this action now and for what purpose?

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Boris Alatovkrap's picture

Welcome to Soviet Republik of Detroit – no pension for you! There is no liberal problem more socialism is cannot solve.

ghengis86's picture

Dear City Pensioners

YOU HAVE NO MORE FUCKING MONEY YOU FUCKING IDIOT LEACHES!

Regards,

malikai's picture

I wonder if the unions are proud of what they and their beauraucrat bosses at city hall have created.

Freddie's picture

They voted for this.   Hope & Change.

B.J. Worthy's picture

They wanted Change, they got Spare Change.

Keyser's picture

Pensions are an artifact of the past and they are lucky that those already vested have their equivalent basis converted to a 401K. Watch for this to happen all over America. 

Boris Alatovkrap's picture

Until government is confiscate private account (why is call 104K!?) or Central Bank is monetize to nothingness. Remember, if retirement or any saving is not quadruple in last 5 year, it is not keep up with Fed Reserve money base. When money begin to exit shadow bank system (descend from Bank-o-sphere™), it is deflate proportional to amount in ratio (1:4 or 20%). If can afford gold, gold, if cannot, then silver, but Boris is recommend copper.

Also remember, any thing not in hand or mattress is subject to bail-in haircut.

ronaldawg's picture

HA HA HA HA - screw you union scumbags.

Can't wait until it happens to the California Highway Patrol and every retired police chief, prison guard, school administrator and teacher in California. 

You thought you could steal from the people of the state of California by buying the politicians in our state with your union dues  - the joke is on you scumbags.

Anusocracy's picture

Screw all the people in the world that live on stolen money.

Boris Alatovkrap's picture

Q: How many bankster is take to screw incandescent bulb?

A: None,... is too busy screw general population.

Anusocracy's picture

Bankers wouldn't be banksters without government.

Government has been screwing the public for many thousands of years. It is the problem.

Keyser's picture

The ironic part is that the governments of the world have been screwing the people on behalf of the banks. 

Boris Alatovkrap's picture

No irony, political class from time memorial is do bankster class bidding. Napoleon, Kaiser, Hitler, Lenin, Wilson, is all answer to bankster, even if crazy S.O.B.

Steaming_Wookie_Doo's picture

Does this include the banks who sell them crooked interest rate swaps, etc? Is Goldman et al going to get their returns cut in like manner to the pensioners?

X_mloclaM's picture

Hey, to you, no offense. Your just the 3millionth, so...

IRS is a contract between two people. You would outlaw the ability to contract?

Is it no the idea of centally backing these that is unpalatable, let bankers do whatever... if they fail, they fail.

 

Oh and enough with the bullshit over derivatives "making" us bail people out again.

ROFLCOPTER ZH sounds like a bunch of fucking EZ beauracrats

You guys likely love the Tobin tax as well.

starfcker's picture

No , it's not a contract between two people. it's a contract between organized crime (the bank) and some affirmative action hire. why should that be considered a contract?

N2OJoe's picture

And thugs with guns to enforce it's will.

 

aerojet's picture

Me too--some Detroit people probably don't deserve this, but Kali needs it good and hard, all of them there.  These people getting $1M retirements are so full of crap!

americanreality's picture

You probably meant "leeches".  I won't call you a fucking idiot.  It doesn't help anything and would make me look like I have emotional/anger issues. 

BigRedRider's picture

I frown on anyone who can't spell a word more than one way. ---Mark Twain

RSloane's picture

They need fresh pockets to pick in Detroit. What disturbs me the most about articles like the one above is that the politicians who made those public union contracts are never held responsible for what they did.

One day the mayor of Scranton [Scranton had billed itself as Pennsylvania's Progressive City] announced that all public employees would be reduced to minimum wage because the city could no longer pay their exhorbitant wages nor contribute to their pension funds. Just like that. No one bothered to review the contracts and figure out who was it that made all of those very expensive contracts and why weren't they held accountable.

pods's picture

From what I remember Scranton was a big mob town.  Nobody wanted to look that deep into the contracts.
I would be happy if they could actually fix I-81.  That seems to be a generational project.

pods 

Boris Alatovkrap's picture

Scranton... hmmmm, is anything good to come from Scranton?

Uncle Sugar's picture

The only thing going for Scranton is it's not in New Jersey

Boris Alatovkrap's picture

<-- Scranton - Uncle Joe "Gaff" Biden

<-- New Jersey - Jon "I just put your money here, oops is gone!" Corsine

booboo's picture

Scranton: def: the space between scrotum and asshole.

dark pools of soros's picture

wait..  no private money to fix roads??? then I guess we dont need them..  when there is a reason to do business on it, there sure will be someone to make or fix a road if worth it to them

 

 

 

 

max2205's picture

But but the Dow is at all time highs.....

Ghordius's picture

you have it backwards. it looks like a "socialist" problem ("good" pensions - badly funded) that "liberalism" is "solving" (classically it's default). of course if other gov funds are used to bail out, then it's socialism again

RonBurgundy's picture

Nope, its a liberal problem (ie. liberals handing out unexamined promises to unions) which "socialism" is solving. Socialism's first move, proceeding from Hegel's assault on language, is to deny the plain meaning of laws which have been written down, making everything, including statute and contract, interpretable according to what will benefit the "society".

Here the contractual obligations that the city and its institutions entered into under law, are being abrogated because some unelected official says its necessary. 

You may not like the unions (I don't either) but cutting down the trees of law in an effort, retroactively, to get at the politicians who pandered to them, is just going to make is more difficult when leviathan turns on the rest of us and starts asserting eminent domain to get at your private property.

Ghordius's picture

interestingly, I like unions. good unions, though, of the kind you can find in the eurozone. some of the German ones are seriously sane. and I listened to various libertarians like Judge Napolitano who have a similar view on them. for some kinds of labour unions make sense

so simplified you are telling me that cutting pensions of what would be the backbone of a socialist party (the city/state employees) here would be a... socialist move?

perhaps you are just playing with the words, i.e. "liberal handing out of unexamined promises to unions", to which I'd say that a good liberal promise would have been to fund them properly in a scheme similar to that most-liberal-of-all, the 401(k) - which is too liberal for most eurozoner's tastes, btw (and get's here on this page enough comments about it's problems)

there is quality to be found in all three main political thrusts, liberalism, conservativism and socialism. I read here on ZH that the only socialist in the US Congress is asking the NSA very pointed questions, for example. yet again: the typical socialist solution would be bailing those pensions out. by making more debt, or devaluing the currency, or new taxes on the rich, or whatever. the liberal and/or conservative solution is to cut

Anusocracy's picture

I have no problem with a fool that wants a particular form of government, but why does every one of them want to force it on all others?

Do they think that their beliefs are better than all others? That their beliefs are correct for everyone?

The belief systems that promoted the survival of a particular group in the past are no longer viable in a modern technological world. They, being an evolutionary adaptation, developed under different conditions.

The hunter-gatherer and pharaonic people of the world need to leave the freedom people alone.

Just fuck yourselves up, not everyone else.

Ghordius's picture

why? You gave the answer yourself: "The belief systems that promoted the survival of a particular group in the past"

Do you have any proof that gov in any form isn't still needed for... survival? for example to keep other predatory govs at bay?

akak's picture

So, Ghordius, your logic is that we need predators to protect us from .... other predators.

How can you fail to see the irony, and futility, inherent in that claim?

N2OJoe's picture

It makes perfect sense! For example:

If I am drowning in debt and about to go bankrupt, what is the most logical solution to my problem? MOAR DEBT!

So Ghordy, when are you running for your second term?

Ghordius's picture

only because I'm pointing out that even the most individualistic persons still profit from the "perks" given by their groups, it does not mean that I subscribe to the madness of your particular group think

Anusocracy's picture

Sure, and everyone benefited from the existence of bacteria, and they still do.

I'm not arguing that those cultural adaptations didn't work in those societies - they were part of our evolutionary past.

I'm saying they DON'T WORK NOW.

And understand that I don't care what totalitarian form of government you want, I want no part of it.

Ghordius's picture

akak, "my logic" runs like this: we are predators. not necessarily as individuals, but as groups

our whole civilization was born out of the conflict between wandering and sedentary groups

and I suspect you are intellectually honest enough to glimpse what I mean

akak's picture

Funny, I don't feel like a predator. 

Nor have I ever lived like one.  Nor, for that matter, has anyone whom I personally know.

I suggest that you might want to reassess your assumptions, which to me seem deeply cynical and erroneous.

 

Ghordius's picture

akak, you don't have to feel like a predator in order to be perceived as one - through the membership to a group that is perceived as or does indeed predate on others

you and I are members of various groups, including "The West". tell me there aren't people that perceive us as predators, through various means and for several reasons

your access to certain resources? certain perks? in how many territories can you travel safely thanks to your passport, a "membership card" for itself?

perhaps you have never lived like one. directly. yet I should not have to mention oil to a "Peak-Oil" proponent. what would have been the price of the gas you consumed up to now without the whole imperial setup?

aerojet's picture

It's never been a viable system in the US--it was all just vote buying and "you'll be gone, I'll be gone" type politics.  They knew this would blow up...someday, but by then the perpetrators would be long gone and the rank and file would be left as bagholders.  This is what all of modern finance and politics seems to be about--identifying bagholders.

sunnyside's picture

Are you talking about union contracts, or social security or medicare here?

RonBurgundy's picture

The typical socialist solution is going to bailing this people out--with more extra-legal programs like obamacare, reinterpretation of standards and benefits for SNAP. . . . its just that unlike contracts entered into, which have the force of law behind them, and the force of law to help interpret them, it'll be open to whatever the socialists want to impose.

Socialism is objectionable not just because of the politics and arrogance of its adherents, but because Law, Private Property, Rights, and everything else is now variously interpretable based on the good for society. Obama styles his socialism a kind of "pragmatism" 

Remember, though, that "pragmatism" under proponents like James and Dewey had exactly the same disdain for objective understandings of law, rights and morality as did socialism.

This is exactly the precedent being laid here--that despite the plain meaning of contracts entered into that those contractual obligations can be broken because of "necessity." 

If the city were really bankrupt, payments to creditors (bondholders) would be the first to be negated, in full, because they are 1) speculative, and 2) have plenty of precedent for how to impair them. But these pension plans are part of compensation packages which were agreed to and then abrogated with no warning, unlike bondholders.

 

Uncle Remus's picture

Perhaps you could elaborate on just what constitutes a "good" union. Now, I know something about unions of various stripes. I was a journeyman until I went into business for myself and it wasn't the trade I was in. My father's side of the family were union, journeymen and craftsmen. It was not a right-to-work state. I had uncles and cousins that worked in the auto industry and in appliance factories.

I am very familiar with the costs involved in the US for a union vs. non-union shop. I made a good living for a number of years providing construction cost estimates (material and labor) for projects ranging in the tens of thousands to tens of millions $US. I am very familiar with the relative labor efficiency factors used for each respective type of organization, union or non.

As an non-union apprentice I worked on many federal and state Davis-Bacon projects and living at the time in a right-to-work state, I also worked on mixed crew projects, meaning union & non-union, sometimes even the same trade, on the site at the same time.

I could find no merit in joining a union.

 

 

A Nanny Moose's picture

cutting down the trees of law in an effort, retroactively, to get at the politicians who pandered to them, is just going to make is more difficult when leviathan turns on the rest of us and starts asserting eminent domain to get at your private property.

I would argue that theft of private property is already occuring, so this is a non-starter. The Law was circumvented by originally consenting to theft. Neither degree of difficulty, nor The Law, will inhibit an entity with a monopoly on coercion and all the guns, which is populated by the biggest criminal class on the planet, and which has proven that it cannot obey the law.

Laws only keep the honest people honest. If people working for government were honest, productive individuals, they would not need to work for an entity with all the guns, and a monopoly on coercion; they would be producing in the free market and engaging in voluntary exchange.

Aside from that, bankruptcy is also The Law.